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NEW YORK, Sept. 21 — Expectations for a recovery in the economy and corporate profits have pushed stocks to multi-month highs. But those hopes will be put to the test this week as investors brace for fresh economic data and the start of the corporate confession season.

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AS THE QUARTER draws to a close, clues to the health of third-quarter earnings will likely begin to trickle out of corporate America as companies scramble to adjust expectations ahead of the flood of quarterly earnings reports.

With many investors betting the end of the year will bring better economic times and the sharp run-up in stock prices since the spring, the market may be vulnerable to any bad news.

“The economic news is getting better, but the corporate earnings outlook is not as optimistic, so as we hear from companies, I think investors may get a little skittish,” said John Forelli, portfolio manager at Independence Investments LLC.

The latest economic reports have been patchy, at best, and so investors will be eyeing a batch of reports due this week —including durable goods figures, weekly jobless claims and home sales data — for more hints about the strength of the rebound.

The Standard & Poor’s 500 index has surged about 18 percent so far this year, while the blue-chip Dow Jones industrial average has climbed about 16 percent, and the technology-packed Nasdaq Composite Index has jumped a hefty 42 percent.

The S&P 500 ended the past week with a gain of 1.7 percent and the Dow finished up 1.8 percent after both touched 15-month highs earlier in the week. The Nasdaq ended the week up 2.7 percent after posting its highest close since March 2002 on Thursday.

The investment banking sector will be in the spotlight this week, with three banking heavyweights — Goldman Sachs Group, Lehman Brothers Inc. and Morgan Stanley — set to issue their quarterly scorecards.

Expectations for solid results from the sector’s marquee names were hoisted late last week after Bear Stearns Cos Inc. reported strength in its mortgage bond business and soothed worries that banks would take a hit in that area as interest rates climbed.

But the flow of earnings reports is otherwise light, leaving investors bracing for any unscheduled company announcements about their upcoming earnings reports.

“Now is the time that companies that are unable to meet or able to exceed their earnings will preannounce that,” said Erik Gustafson, portfolio manager at Stein, Roe & Farnham. “We’re all wary of any negative preannoucements and looking for any positive surprises.”

Operating earnings for the S&P 500 are expected to show a gain of 14.9 percent in the third quarter and an increase of 16.7 percent overall in 2003, according to earnings tracking company Thomson First Call.

Of the 190 companies that have made announcements about their third-quarter earnings so far, about half have said their earnings would miss Wall Street’s forecasts, while 22 percent said they would beat estimates, and 28 percent said their results would be on target, Thomson First Call said.

TAKING THE ECONOMY’S PULSE

Weekly jobless claims data on Thursday will be of particular interest to investors. Concerns have been growing that lingering weakness in the labor market could put the brakes on consumer spending, a major engine of U.S. growth, and hinder the economy’s fledgling rebound.

Economists polled by Reuters said they expected the number of Americans lining up for first-time unemployment benefits ticked up to 400,000 in the week ended Sept. 20 from 399,000 in the previous week.

The government’s August report on orders for durable goods will also garner some attention. It is expected to show that orders for costly manufactured items like refrigerators and cars climbed 0.6 percent last month, a bit less than the 1 percent they grew in July.

“The whole idea here is investors are waiting for business spending to really pick up and we haven’t really seen that kick in, in earnest yet,” said Ozan Akcin, chief market strategist at Puglisi and Co. “So this is one of these indicators that shows you whether the corporate sector is actually spending or not.”

Reports on new and existing home sales are also on tap, and they could provide some signals on whether the housing sector — an area of strength in an otherwise sluggish economy — is holding up despite a recent rise in interest rates.